Sales Tax Discrepancies Found In Food Delivery Space

Food delivery services like Grubhub need to charge more for sales tax and aren’t doing so, according to company CEO Matt Maloney.

Maloney’s comments appeared in The Wall Street Journal, which reported that more and more delivery services, like Uber Eats, Postmates and DoorDash, are receiving more attention about taxes as the delivery industry grows. The sector is projected to receive $10.4 billion in delivery fees by the year 2023, a significant rise from $4.4 billion in 2017.

Those numbers mean tens of millions of dollars in terms of taxes, but customers have noticed that different services charge different amounts, and uniformity is rare. Also, many companies are incentive driven in a surge to attract new business, but as the industry becomes more normalized, that could change.

Another issue that makes things difficult is the fact that taxes vary from state to state, and different business models could be treated differently tax-wise depending on the service being used.

“Taxation of food delivery is a hot mess,” said Stephen Kranz, a tax lawyer with McDermott Will & Emery. “In general though, delivery fees are more often than not taxable.”

Uber said it collects sales taxes when necessary depending on the area, and Postmates said it complies with all tax laws.

Grubhub’s Maloney said his company collects the right amount in sales taxes.

“The 34 states that have told us to tax our service and delivery fees need to audit everyone in our industry to make sure we’re following their tax laws,” he said. “I’m happy to be audited with the rest of them.”

Maloney said Grubhub has collected about $10 million in sales tax from New York, Texas, Pennsylvania and California.

The Pennsylvania Department of Revenue said “the food-delivery companies should be collecting sales tax on the entire purchase price, which includes the cost of food, delivery and service fees.” Some companies charge prices before the fee.